They've gone and done it again....

[SavageReturns]

Yep, they've diddled us again.

This is a long one but very, very important and I implore you to take the time to digest.

Many of you will no doubt have noticed that since 28 September, stocks have been on abit of a bull run (or bear market rally). In fact, if you look at the distribution of returns, some indices have had what can be considered quite extreme moves to the upside. Most notably for example, the DAX40. And these moves have come against some pretty dire and grim lagging and leading economic indicators. So, why the enthusiasm? Any new fantastic monetory or fiscal policy announcements? Well, sort of....

Let's observe a strong correlation. On 28 September 2022 the Bank of England (BoE) announced and opened a programme to purchase long-dated UK Government Bonds (Gilts). This was claimed to be necessary because of volatility in the long-dated Gilt market. “Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability. This would lead to an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy. In line with its financial stability objective, the Bank of England stands ready to restore market functioning and reduce any risks from contagion to credit conditions for UK households and businesses.” (BoE, 28 September 2022)

The operation included the Chancellor of the Exchequer approving an extension of the maximum size of the APF (Asset Purchase Facility) by £100 billion to £966 billion. Subsequent total (M3) money supply has indeed increased in September by £100bn (while other major central banks have been decreasing supply). Bear in mind that the APF was introduced in early 2009. This £100bn extension constitutes over 11% increase in that balance in one day.

The core motivation for the extension to the APF was the alleged serious distress in the LDI market (Liability Driven Investments) which would allegedly cause UK pension funds to fail and huge financial turmoil and failure in the UK financial system.

Who received that £100bn? We don't know. What did they do with it? We don't know. And due to the nature of the APF, we won't know. What we do know is that the BoE was buying bonds, which is essentially QE. And we all know what happens to equity valuations with QE....

So here's the boom.

I posit that equity and bond assets in the EU and UK were in serious distress and had been for some time, significantly because of their stance against Russia in the Ukraine conflict and specifically because of the inflation and energy crisis cause by EU and UK economic sanction policy and prior monetary and fiscal policies. The LDI distress claims were merely used as an excuse for the BoE to print yet more money to prop the equity and bond markets up with a pseudo ‘plunge protection’ policy if you will. But not just the UK, importantly EU markets and specifically German equities. Essentially, yet more UK tax payer money is being used to bailout the financial system but not in the way asserted by the BoE or HM Treasury. Importantly, those in the know with prior knowledge of the scheme would have benefited from taking directional bets on the market move caused by such stimulation.

You might first think, is £100bn enough to stimulate such a market? Yes, in the timespan deployed it would be, especially if it was used as margin and leveraged 10, 20 or even 50x. That £100bn can turn into a trillion or more through asset derivatives.

The key here is possibly also political motivation. The market was heavily ‘shorted’. This information was known through options data. They could see for example that retail traders had a negative sentiment against the DAX40 by up to 65% selling against the index prior to 28 September. Negative sentiment overall is very high in comparison to the past 40 years. It makes logical sense to short the DAX40 for example due to all the macro-economic indicators, both lagging and leading, flashing red for recession and poor economic performance outlook. It’s also possible to assume that Russians were suspected of being amongst those shorting the markets.

This creates conditions ripe for a ‘short squeeze’ which means that the market suddenly and abruptly goes up in value, causing those short positions to be ‘covered’ (closed) which stimulates more buying pressure, which pushes values up further. But that needs SERIOUS and available capital. Think of the BoE stimulus like dropping a mento into a coke bottle. This scenario can be well demonstrated by the extreme Gamestop scenario in 2021. However, it would take significantly greater resources to move entire developed market indexes. Like those at the disposal of a large developed market central bank for example…. While it would be difficult to push the indexes to the extreme volatility witnessed by the GameStop stock (nor desirable), it certainly seems feasible to influence valuations to a noticeable degree.

So why the BoE? Why not the ECB? Well, it had already announced that it was actually decreasing money supply through Quantitative Tightening and would therefore need a serious excuse to pivot and print more, which was likely lacking. This had to be done without any admittance that there was a problem in equity markets, or why the problem was occurring (because of their policies). In the event the ECB were to pivot, market participants would be far more likely to suspect what would happen to equity valuations (markets always go up under QE) and would have covered shorts straight away, avoiding any opportunity to profit from short squeezes and in fact opening a more obvious opportunity to profit from going ‘long’ and buying the EU indexes. The QE had to come from outside the EU and ECB and the smokescreen of the UK LDI fiasco was conjured up to justify the BoE QT policy pivot, asserted as only a temporary facility, in order to muster the funds to support distressed EU and UK equity and bond markets while profiting from the ensuing short squeeze caused by the rapid and extreme change in market valuation direction caused by the QE stimulus.

So, in summary, I believe that certain forces exaggerated the Gilt volatility issue and LDI distress in order to justify a pivot in BoE monetary policy from QT to QE and print more money to exercise a short squeeze. The liquidation of Gilts through the HM Treasury authorised BoE purchases freed up significant capital which was used, through leverage, to support a seriously distressed EU and UK equity and bond market caused by the UK and EUs policy stance against Russia from the Ukraine conflict. In doing so, their collaborators also stood to profit from the ensuing ‘short squeeze’ by causing a rapid, unexpected and extreme change in market valuation direction from the QE stimulus.

Can't even trust the central banks now....

[Adamski]

Think the bear market rally was because US inflation rose less than expected in October (announced mid November), so markets anticipating inflation turning the corner. So this month got 2 weeks of rally, and 2 weeks retreat, so not much different (certainly not a bull run)

[SavageReturns]

Where was the 2 week retreat in the Dax? I'm not referring to US indices. I impore you to look at the actual correlation. Specifically September 28th.

[dealtn]

Who received that £100bn?

Currently just over £19bio

https://www.bankofengland.co.uk/markets ... usage-data

Where has all your proposed leverage come from? Who wrote it? Whats the transmission mechanism for it to go into equities?

It looks, to me, without evidence, you are finding conspiracy theories where none exist.

[Spet0789]

The original post is tin hat, swivel eyed loon nonsense.

So the BoE is buying German equities on margin, under the cover story of supporting the Gilt market.

They can’t be. They’re too busy helping the Illuminati dredge Loch Ness to recover the remains of Elvis Presley. If you read Nostradamus backwards in Sanskrit you’ll find it includes the passage: “when the bones of the fatty from Tennessee are found where the plesiosaur sleeps, the end of days is nigh”.

[1nvest]

So, in summary, I believe that certain forces exaggerated the Gilt volatility issue and LDI distress in order to justify a pivot in BoE monetary policy from QT to QE

I thought the planned pivot from intended QT to QE was a consequence of LT/KK. Sack the treasurer, ignore the OBR, don't prime the markets and refuse to report what you're doing until a month+ later. "Trust the Tories with the economy" ... LOL! Can't even manage a p up in a lockdown.

[monabri]

You are Dan Brown and I claim £5!

(For a "Brucie Bonus"....why should I be "all shook up"?)

[TUK020]

They can’t be. They’re too busy helping the Illuminati dredge Loch Ness to recover the remains of Elvis Presley. If you read Nostradamus backwards in Sanskrit you’ll find it includes the passage: “when the bones of the fatty from Tennessee are found where the plesiosaur sleeps, the end of days is nigh”.

Not when Elon tweeted it

[Itsallaguess]

The original post is tin hat, swivel eyed loon nonsense.

I think we're supposed to say 'Welcome to the Lemon Fool' before we get into that sort of stuff...

:O)

Cheers,

Itsallaguess

[SavageReturns]

Who received that £100bn?

Currently just over £19bio

Where has all your proposed leverage come from? Who wrote it? What's the transmission mechanism for it to go into equities?

It looks, to me, without evidence, you are finding conspiracy theories where none exist.

Excellent questions and points raised. However, to accuse me as a 'conspiracy theorist' is a bit extreme, don't you think? It's not like conspiracies haven't happened in the financial world!! I may well be wrong, and happy to be found so, but let's be gentlemen here shall we ol' sport? Afterall, I've said nothing derogatory to you.

Anyway, let's move on.

So, if less than 20% of the APF's extension was used, what was the horrendous fuss about? A trifling £19bn? Don't forget, the claim was:

"“Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability. This would lead to an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy. In line with its financial stability objective, the Bank of England stands ready to restore market functioning and reduce any risks from contagion to credit conditions for UK households and businesses.”

Yet they literally begged the market to take £100bn and couldn't even giveaway 20% of that.

[SavageReturns]

The original post is tin hat, swivel eyed loon nonsense.

So the BoE is buying German equities on margin, under the cover story of supporting the Gilt market.

They can’t be. They’re too busy helping the Illuminati dredge Loch Ness to recover the remains of Elvis Presley. If you read Nostradamus backwards in Sanskrit you’ll find it includes the passage: “when the bones of the fatty from Tennessee are found where the plesiosaur sleeps, the end of days is nigh”.

Another extreme accusation. Why the hostility brother? As replied elsewhere, it's not like huge conspiracies in the financial world haven't been uncovered before? Conspiracies are exposed time and time and time again.

[dealtn]

Who received that £100bn?

Currently just over £19bio

Where has all your proposed leverage come from? Who wrote it? What's the transmission mechanism for it to go into equities?

It looks, to me, without evidence, you are finding conspiracy theories where none exist.

Excellent questions and points raised. However, to accuse me as a 'conspiracy theorist' is a bit extreme, don't you think? It's not like conspiracies haven't happened in the financial world!! I may well be wrong, and happy to be found so, but let's be gentlemen here shall we ol' sport? Afterall, I've said nothing derogatory to you.

Anyway, let's move on.

So, if less than 20% of the APF's extension was used, what was the horrendous fuss about? A trifling £19bn? Don't forget, the claim was:

"“Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability. This would lead to an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy. In line with its financial stability objective, the Bank of England stands ready to restore market functioning and reduce any risks from contagion to credit conditions for UK households and businesses.”

Yet they literally begged the market to take £100bn and couldn't even giveaway 20% of that.

They literally didn't beg the market to take £100bn. They didn't need to giveaway (sic) 20%.

They bought, at prevailing market prices, what was required in an open process, to restore the market to what was considered a "functioning" state.

I feel whilst you haven't, yet, said anything derogatory to me personally you are at least being derogatory to my intelligence (and possibly other's too) in stating positions that are both untrue, but also easily establishable by references to the official pages of the Central Bank, or easy access to media commentary of them.

[SavageReturns]

Who received that £100bn?

Currently just over £19bio

Where has all your proposed leverage come from? Who wrote it? What's the transmission mechanism for it to go into equities?

It looks, to me, without evidence, you are finding conspiracy theories where none exist.

Excellent questions and points raised. However, to accuse me as a 'conspiracy theorist' is a bit extreme, don't you think? It's not like conspiracies haven't happened in the financial world!! I may well be wrong, and happy to be found so, but let's be gentlemen here shall we ol' sport? Afterall, I've said nothing derogatory to you.

Anyway, let's move on.

So, if less than 20% of the APF's extension was used, what was the horrendous fuss about? A trifling £19bn? Don't forget, the claim was:

"“Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability. This would lead to an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy. In line with its financial stability objective, the Bank of England stands ready to restore market functioning and reduce any risks from contagion to credit conditions for UK households and businesses.”

Yet they literally begged the market to take £100bn and couldn't even giveaway 20% of that.

I should also remind that the M3 money supply was reported in October of sharply increasing by over £95bn in September. Very close in sum to the £100bn APF extension. Coincidence? Could be.

[dealtn]

Who received that £100bn?

Currently just over £19bio

Where has all your proposed leverage come from? Who wrote it? What's the transmission mechanism for it to go into equities?

It looks, to me, without evidence, you are finding conspiracy theories where none exist.

Excellent questions and points raised. However, to accuse me as a 'conspiracy theorist' is a bit extreme, don't you think? It's not like conspiracies haven't happened in the financial world!! I may well be wrong, and happy to be found so, but let's be gentlemen here shall we ol' sport? Afterall, I've said nothing derogatory to you.

Anyway, let's move on.

So, if less than 20% of the APF's extension was used, what was the horrendous fuss about? A trifling £19bn? Don't forget, the claim was:

"“Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability. This would lead to an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy. In line with its financial stability objective, the Bank of England stands ready to restore market functioning and reduce any risks from contagion to credit conditions for UK households and businesses.”

Yet they literally begged the market to take £100bn and couldn't even giveaway 20% of that.

I should also remind that the M3 money supply was reported in October of sharply increasing by over £95bn in September. Very close in sum to the £100bn APF extension. Coincidence? Could be.

So the M3 (source required please) Money Supply in the UK went up by close to £100bn 2 months before the Central Bank "intervened" to the tune of £20bn in the Gilt market, and you are postulating this as proof of a leveraged event in equities?

[Spet0789]

The original post is tin hat, swivel eyed loon nonsense.

So the BoE is buying German equities on margin, under the cover story of supporting the Gilt market.

They can’t be. They’re too busy helping the Illuminati dredge Loch Ness to recover the remains of Elvis Presley. If you read Nostradamus backwards in Sanskrit you’ll find it includes the passage: “when the bones of the fatty from Tennessee are found where the plesiosaur sleeps, the end of days is nigh”.

Another extreme accusation. Why the hostility brother? As replied elsewhere, it's not like huge conspiracies in the financial world haven't been uncovered before? Conspiracies are exposed time and time and time again.

An extreme accusation for an extreme suggestion!

I'm sorry mate, you may well be a lovely person, but real damage has been caused over the past decade or so because crazy theories like this have not been forcefully refuted early.